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BPCL: Subsidy gains cover up forex losses - Views on News from Equitymaster
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BPCL: Subsidy gains cover up forex losses
Feb 11, 2012

Bharat Petroleum Corporation Ltd (BPCL) has announced the third quarter results for financial year 2011-2012 (3QFY12). The company has reported a 60.4% year on year (YoY) growth in sales and a seventeen- fold increase in the bottomline on a YoY basis. Here is our analysis of the results.

Performance summary
  • For the quarter, sales were up 60.4% YoY. For the first none months, topline registered a growth of 38.5% YoY.
  • The operating profits for the quarter were up 5 times (YoY), with margins at 6.3% (up from 2.0% in 3QFY11). For the first nine months, the company booked losses on account of high losses on the sale of petroleum products.
  • The net profits for the quarter registered a seventeen fold increase (YoY) during the quarter. The net profit margins for the quarter stood at 5.3% (versus 0.5% during 3QFY11). For the first nine months, the company booked losses at the bottomline level.
  • The crude throughput for the quarter stood at 6.13 million metric tons (MMT), up 9.9% on a quarter on quarter (QoQ) basis ,up 22% YoY. The crude thruput for the first nine months stood at 16.91 MMT, up 4.4% YoY.

Standalone financial snapshot
(Rs m) 3QFY11 3QFY12 Change 9MFY11 9MFY12 Change
Net sales 366,859 588,468 60.4% 1,063,532 1,472,883 38.5%
Expenditure 359,371 551,371 53.4% 1,045,238 1,484,376 42.0%
Operating profit (EBDITA) 7,488 37,097 395.4% 18,294 -11,493 -162.8%
EBDITA margin (%) 2.0% 6.3%   1.7% -0.8%  
Other income 3,103 4,166 34.3% 11,648 12,227 5.0%
Interest 2,747 5,174 88.3% 7,851 13,055 66.3%
Depreciation 3,700 4,667 26.1% 11,726 14,168 20.8%
Profit before tax 4,144 31,422 658.3% 10,365 -26,489 -355.6%
Profit before tax margin (%) 1.1% 5.3%   1.0% -1.8%  
Tax 2,270 26 -98.8% 4,250 26 -99.4%
Profit after tax/(loss) 1,874 31,396 1575.5% 6,115 -26,516 -533.6%
Net profit margin (%) 0.5% 5.3%   0.6% -1.8%  
No. of shares (m)         362  
Diluted earnings per share (Rs)*         nm  
P/E ratio(x)*         nm  
On the basis of trailing 12 months earnings
  • The market sales (excluding exports) for the quarter came at 8.04 MMT, up 14.2% QoQ and up 8.6% YoY. For the first nine months, market sales (excluding exports) came at 22.9 MMT, up 6.5% YoY. For the nine months, BPCL witnessed an increase in sales of Motor Spirit Retail (up 4.98% YoY), High Speed Diesel Retail (up 12.87% YoY), Aviation Turbine fuel (up 7.21%) and LPG (up 9.8% YoY). The increase was slightly offset by decline in the sales volume of Furnace oil and Naphtha (down 31.65% YoY and 29.83% YoY)

  • The exports sales volumes for the quarter came at 0.95 MMT, up 1.1% QoQ, up 50.8% YoY. For the first nine months, the exports sales volumes came at 2.59 MMT, up 34.9% YoY.

  • For the first nine months, the gross refining margins stood at US$ 2.78 per barrel (versus US$ 3.63 per barrel last year). The same has been adjusted against the cost of raw materials.

  • The company has taken into account a compensation of Rs 35.7 bn during the quarter (Rs 86.2 bn for nine months) from the upstream sector for losses on sales of petroleum products.

  • The company has taken into account compensation worth Rs 69.9 bn from the Government of India (Rs 105 bn for nine months) for losses on sales of petroleum products .The same has been accounted as income.

  • For ex losses for the quarter came at Rs 12.6 bn ( up 70 times as compared to last year) due to sharp rupee depreciation versus US dollar. For the nine months, forex losses came at Rs 21.7 bn (38 times of last year's losses). The same have been accounted under 'Other expenditure'.
Cost break-up
(Rs m) 3QFY 11 3QFY 12 Change 9MFY11 9MFY12 Change
Raw materials 339,008 514,869 51.9% 983,474 1,395,927 41.9%
% sales 92.4% 87.5%   92.5% 94.8%  
Staff cost 5,696 4,892 -14.1% 15,634 15,847 1.4%
% sales 1.6% 0.8%   1.5% 1.1%  
Other expenditure 14,668 31,610 115.5% 46,130 72,602 57.4%
% sales 4.0% 5.4%   4.3% 4.9%  
Total cost 359,371 551,371 53.4% 1,045,238 1,484,376 42.0%
% sales 98.0% 93.7%   98.3% 100.8%  

What to expect?
While the company has posted strong results on account of subsidy relief, there is no clarity on the same as of now and remains a major overhang on performance in the future. The stock is currently trading at Rs 598.

We will present a detailed result analysis and update our subscribers regarding the valuations post the conference call scheduled next week.

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